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Your money is only as safe as the place you keep it in, and the same goes for storing Bitcoin. Choosing a Bitcoin wallet is a multi-faceted process that deserves your time and attention. Below is an explanation of the types of wallets available and their advantages and disadvantages so that you can figure out which is best for your specific needs. Also, we’re using Bitcoin for the purpose of this article, as it’s the most commonly traded crypto, but these same tips go for any cryptocurrency wallet available.
What type of wallet is right for me?
While there are hundreds of wallets available to you as websites, apps and drives, they generally fall into two categories hot and cold.
Cold wallets
Otherwise known as offline wallets, these are not continuously connected to the internet. Think of it this way if hot wallets are online banking, cold wallets are keeping cash in a shoebox in your sock drawer. They’re much more safe from online attackers and computer-born malware but not always convenient to use in the internet marketplace. Use a cold wallet if
- you hold a lot of Bitcoin (over $1,000) and would like to store it for a significant period of time.
- you value privacy and independence in safeguarding your Bitcoin.
- you don’t use your Bitcoin often and don’t need to access it on the go.
Here are some types of cold wallets.
Hardware wallets
Storing your Bitcoin in a hardware wallet is like keeping all your cash in a bank vault cold, secure and quite expensive. As the name suggests, these wallets store your private keys on USB sticks or memory drives, making them least vulnerable to attack or malfunction. Hardware wallets come in a range of designs supporting varying user interfaces, so you can certainly find a wallet that’s best suited to you and your style of work.
This versatility and security do come at a price up to a few hundred dollars for some hardware wallets which is why we recommend them for those who plan to store a large amount of Bitcoin for a long period of time. The top hardware wallets available at the moment are Trezor, Ledger, KeepKey and BitLox.
Paper wallets
Paper wallets operate in a similar way to hardware wallets, but they’re a little more lo-fi. The term applies to any physical copy of your public or private keys, often as a paper printout. The printout will display codes you can use to access your keys and manage your stored Bitcoin.
Much like hardware wallets, they are classified as cold (i.e., not connected to the internet), which makes them secure from computer-born viruses and cyberhacking. But unlike USB drives, these sheets of paper can be lost or destroyed much more easily. You can find Bitcoin paper wallet generators online if this is the wallet for you.
Hot wallets
Hot wallets, or online wallets, are connected to the internet and on the other end of the spectrum much more convenient to use, but less safe from online attacks. Plus, unlike hardware wallets, they’re generally free, so they are ideal for those just getting into crypto keeping. Hot wallets are good if
- you have a small amount of Bitcoin.
- you don’t mind a third party protecting your wallet, or you want to share your wallet with someone else.
- you want to use your Bitcoin regularly and access it wherever you are.
Some examples of cold wallets include the following.
Desktop and mobile wallets
These types of wallets are software-based and you guessed it installed on desktop computers or mobile phones. Unlike the cold hardware wallets, desktop and mobile wallets are hot, or always connected to the internet, making them more vulnerable to malware and attacks and, therefore, naturally less secure than hardware wallets.
Mobile wallets, however, come with the added benefit of being smaller, easier to use and generally more user-friendly for new Bitcoin adopters. Some great software wallets available on desktop and mobile include Jaxx, Exodus and Electrum, while Breadwallet and SamouraiWallet are great mobile-only software wallets.
Web wallets
As we continue down the road of less secure but more convenient, web wallets are the other end of the spectrum from hardware wallets. These wallets operate entirely online and can come in the form of websites or browser plugins.
Pro tip keep an eye on the URL. Those that start with HTTPS are more secure than web wallets with an address starting with HTTP. Access wallets like Coinbase, Xapo, Binance and Rahakott anywhere you can access the web.
Questions to ask about Bitcoin wallets
With the huge number of competitors out there, you will want to vet the market for the ideal wallet to suit you and your needs. This means researching each potential offering, being clear about your own wants and needs and seeing whether these two match up. Here are some questions you could ask about your wallet.
- What’s the user experience?
- What security is in place on the wallet? Is there two-factor authentication?
- Does it provide a backup service?
- Who’s behind the wallet? What do you know about the company and its work?
- Does it support cryptos other than Bitcoin?
- What fees are involved?
- Does it have multi-signature functionality (to share with other owners)?
At the end of the day, you’re trusting this wallet with your money, so you want to know as much as you can about it before you commit.
Lauren Groff is a professional writer at Boom Essays and State of Writing. She writes about blockchain and Bitcoin. Also, she is a tutor at OX Essays.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
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